Making Sense of Consumers’ Recession Behavior

We know that consumers are continuing to hunker down, spend less and be more selective in an effort to weather the recession.

But which industries consumers have most aggressively shunned? How have their behaviors and attitudes changed from month to month? Performics has begun surveying consumers each month and tracking changes in consumer attitudes and behaviors in response to the current recession. Two months into the study, some interesting findings have already emerged.

Consumers have cut spending in many ways, but certain industries have been hit harder than others, for example:
· Nearly one in five consumers have cancelled summer vacations
· Nearly half (46%) reported spending less on home improvements
· More than two thirds of consumers reported cutting back their household spending on luxury goods and services, as well as entertainment
· More than half reported cutting back spending on apparel and personal care (clothing, shoes, accessories, cosmetics) and major household items (electronics, appliances, household accessories)

Consumers also seem to be losing optimism that the end of this recession is near. In April, for example, 40% of respondents said their household economic situation was improving or that they expected it to improve this year. Those reporting the same feeling in May, however, fell to only 29%.

When consumers anticipate continued economic problems, it seems human instinct leads to two actions: reduce spending altogether or change buying behavior.

Five specific factors topped the list of motivators for reduced spending in both surveys:
1. Cutting back spending on non essentials
2. Making less money this year
3. Currently unemployed
4. Lacking confidence in the economy
5. Less value in home and savings

The top actions taken by consumers to decrease spending reported by consumers in both surveys include:
1. Using coupons
2. Shopping at discount and outlet stores
3. Consolidating shopping/errands to get everything done in one trip
4. Sticking to a budget and controlling impulse shopping
5. Using shopping comparison and search engines to find the best available price

Taking these factors into consideration, CMOs should ask three types of questions – contextual, motivational and actionable – about how their customers are spending as the recession progresses. Some helpful contextual questions include:
· Is our brand value proposition demonstrating long-term value?
· Are we sending relevant messages about our products / services given the economic climate?
· Do our marketing strategy and tactics appeal to consumers’ change in buying behavior?

Useful motivational questions to address consumers’ attitudes towards your specific industry include:
· Will consumers’ “staycation” mentality make them more likely customers?
· Are our customers willing or unwilling to spend in our category during this recession?
· Does our value proposition reassure customers of our worth?

Then, ask questions about specific actions you and your customers are taking and determine how those actions affect your business:
· Are we competitive on price or other key factors?
· How has our customers’ average order value changed?
· Has purchasing frequency increased or decreased?

Marketers understand that attitudes and behaviors change frequently, particularly in times of instability, and responding to contextual, motivational and actionable considerations of consumers is crucial to success. Marketers that can stay on top of and respond to these changes quickly position their companies to make the best of a bad situation and will be ready to grow upon the eventual upturn.

Michael Kahn ([email protected]) is senior vice president of marketing at Performics and a monthly contributor to Chief Marketer.